What Happens to Lawmakersâ?? Pay During State Government Shutdowns?

Minnesota’s state government shutdown lasted for three weeks and grabbed headlines until the budget impasse was resolved on July 21, however one facet of the shutdown took longer to sort out: lawmakers’ pay.

In Minnesota, state employees that are designated nonessential status do not receive pay during government shutdowns – this policy affected approximately 22,000 state employees during the July 2011 shutdown. On the other hand, Minnesota House of Representatives rules allow legislators to reject, defer or accept their pay during shutdowns.

Eighteen Minnesota House members who declined paychecks during last month’s state government shutdown got their full salaries retroactively, the House payroll office said Monday… Another 32 state representatives followed through on a shutdown pay cut averaging $1,600, representing the amount they would have earned during the shutdown. The remaining 84 House members were paid normally during the shutdown. Fourteen senators who declined shutdown pay didn’t have the option of getting it retroactively.

There are no clear political points to be made here. Lawmakers from both sides of the aisle and across the state chose to reject, defer and accept pay from the shutdown period. Lawmakers worked differing amounts during the shutdown and they are spending their pay differently after receiving it (for example some have announced they’re donating their pay to non-profit organizations).

The more interesting story here is the role between legislator compensation incentives and budget negotiations. The following assumptions are made assuming all other things equal:

Lawmakers who reject pay have the strongest incentive to resolve the budget deficit expediently. They’re most likely to feel the strain the shutdown is having on public employees and the public. These legislators are less likely to be intransigent and more likely to accept fleeting compromise without adopting meaningful reform, thereby making another shutdown more likely.

Lawmakers who defer pay have an incentive to resolve the budget deficit expediently and feel the strain on public employees and the public. At the same time, they will receive compensation after the shutdown is resolved, so this ameliorates the aforementioned effects. For these legislators, more so than any others, additional factors (besides compensation) will have the greatest impact on their likelihood of intransigence and/or pursuit of meaningful reform.

Lawmakers who receive pay have little to no incentive to resolve the budget deficit expediently and are least likely to feel the strain the shutdown is having on public employees and the public. These legislators are the most likely to be intransigent because they suffer no compensation losses by entrenching themselves on issues. That being said, they have the strongest incentive to pursue permanent and meaningful reform that would make future shutdowns less likely.

All that being said, there are a wide range of other factors that impact budget negotiations, including but not limited to: legislator net worth, budget deficit magnitude, media coverage, duration of the shutdown, etc.

No one incentive structure is objectively “best” because each set of incentives contains competing tradeoffs. As states continue to grapple with budget deficits it would be wise for policymakers across the U.S. to revisit state rules on legislator pay to ensure they’re comfortable with the tradeoffs they would be forced to make.

Read more of Reason Foundation’s coverage of Minnesota’s state shutdown here, here and here.